For the Week of March 15, 2004
Everyone assumes the PC is at the center of the Always-On world.
After all, nearly everyone has one, or at least everyone who we think would be a prospect for Always-On has one. PC prices continue to fall, and good desktop hardware can now be had for $400. If you want that in a laptop, with a flat screen and keyboard, prices of under $1,000 are not uncommon.
But consider what I face, or what an ISP faces, in a PC-centric Always-On world. My set-up, for instance, starts with an old Alcatel ADSL modem (that business has since been sold to Thomson), linked to a Linksys router, protected by a Norton Firewall hidden inside a Windows 98 PC. (Until recently there was also an Alphashield privacy box between the router and the modem.)
Not only is it constantly breaking down, but I had to become a technical expert myself to figure out what was going wrong. Is it the carrier's connection, is it the modem, is it the router, is it the firewall, is it the PC, is it the software, is it the AlphaShield? If you are taking responsibility for services based on my set-up, you get to guess.
In my own case, the problem lies in how Norton and Windows interact. Norton uses seldom-used Windows files, and creates its own databases as well. These interfere with one another somehow. My network connection to the other PCs in the house goes first, then their connection to the Internet, and finally my own. At this point I can get everything going again in five minutes, using the VXWorks-based Linksys router software. But this is no way to run a railroad, or an Always-On home.
Now a lot of companies, and a lot of carriers, hold out great hope for "home residential gateways." Netopia makes a nifty one, with DSL in and 802.11 out. It's available, through their site (which links to a host of re-sellers) at about $220.
Netopia's offer to carriers is public knowledge. They promise to lower support costs, thanks to a patent-pending antenna arrangement and in-depth knowledge of phone carrier set-ups. They promise a host of up-sells, starting with parental controls, which Netopia runs from its own servers and offers to re-brand with the carrier's name. And lurking behind all that, ready to strike into your pocketbook whenever you and the carrier are ready, is Voice Over IP.
With a Netopia gateway, the company promises, a carrier can bring in $150 per month from each customer, for a start, money from customers who are otherwise considering cable modem and cellphone combinations that leave carriers with bupkis (that's yiddish for nothing). Think about it, $50/month for the line, $50/month for the DSL connection, then $10/month for home networking, another $10/month for parental controls, and $30/month for VOIP service (and goodbye MCI or AT&T).
Where is the hole in that? There are two holes, and I've identified one. Do you want to support Netopia's DSL modem, or someone else's? And what about Windows? What about the customer's software - can it handle all that networking? And what happens the first time they find a "dead spot" in their home - some place behind a pillar or fireplace where the wireless signal doesn't reach? What about their neighbor who suddenly buys a 2.4 GHz cordless phone? Want to be responsible when that interrupts some virtual reality game?
Even if your support calls come from India they're not free. And imagine if you have to roll a truck, either to install the set-up or keep it running. What happens to the carrier's P&L statement then? A hole is blown in it.
What's the second hole? Why would someone rent a gateway from you when they can go to a store - even Netopia's store - and just install their own? Forget your $10/month home networking charge, they trust their kids, and they'll do VOIP through Vonage or client software, thank you. Now you've got a $50/month DSL contract that's handling a ton of backhaul, from all the home's phones, computers, and what-all. Maybe you can increase the speed someday and get a bit more, but maybe the customer just leaves that network unsecure and lets their neighbor's kids play with Kazaa at night, or just lets their own kids play with Kazaa at night. Think of the potential liability!
So the whole gateway-carrier scenario has a few holes in it. OK, it's a Swiss Cheese.
Is there a way out? I think there is.
The way out is to forget the PC, or at least recreate it, and make the gateway the center of the Always-On home.
That means you put a basic PC in the gateway, which controls all your basic communications applications. Now, at least, there's one machine you can go to when support issues come up. And, with basic PC functionality down to a single, cheap board, you can take advantage of Chinese economies-of-scale and sell the whole thing for, say, $300. Remember, it has no interfaces (that's in your PC), no typewriter, no screen, no floppy drives or CDs. It's an all-in box that combines PC functionality, the DSL modem, and networking. If it breaks, replace it. (And by networking we mean firewalls and virus protection as well, of course.)
Now you have a modular, scalable, robust platform that handles security, that handles voice, that handles routing, that handles home networking. You might buy it, or the carrier might rent it to you.
Oh, and one more thing. You know how my Linksys router, which presently performs most of these gateway functions, looks kind of like a cockroach, sitting on four squat feet atop my PC, or modem, its little lights blinking evilly at me?
This new gateway needs real industrial design behind it. It needs to be beautiful. It needs to be fashionable. It needs to sit on top of my desk, an objet d'arte that can reach any room in the house with its little bunny ear antennae. It needs to be tall, and inside, it needs slots. (Are you with me so far, Mr. Jobs?)
That's right, slots. Little plug-in slots, Firewire slots. Slots like in an old IBM PC, but smaller, cleaner, ready for a new century.
What goes into those slots? Applications. Not boards, applications, hardware and software. Plug in an application that uses the network to find my heart beat and blood pressure, with clients embedded in my chest or strapped to my skin. Plug in an application that finds all the RFID tags around my house and knows where my keys are, where my son's school planner is, where my medicine bottle might be hiding. Plug in an application that links with another server on my fridge, a UWB radio that can tell me how old my cheese is, how much milk I have, and whether we'll really be able to have spaghetti alfredo tonight (or do I need eggs)? Just for starters.
And when I run out of slots I get a second gateway, mesh networking, plug it into another room and extend the network. Or just sit it next to the first one. It's up to you. I have three wishes, and for my third wish I want three more wishes.
Everything you need for these applications - hardware and software - is all in those little plug-in boards. Their interfaces could be my PC, or their interfaces could be my telephone. My cordless rings, I answer it. It's my own voice. My blood sugar is low. I really need a candy bar...
I work as a business analyst with Progressive Strategies, a New York research firm that has the ear of the world's top technology companies.
My last book, "The Blankenhorn Effect" won the Computer/Internet category in the 2003 Independent Publisher (IPPY) awards .
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Takes on the News
Ford and Sloan
I don't know if you noticed it, but there is a central planning aspect to Moore's Law. By making economic change predictable, Moore's Law lets a chipmaker set a five year plan, from a central office, and even (unlike the Communists) execute to it.
I well remember an early-1990s keynote from then-Intel chairman Andy Grove, in which he talked about making the "686" (they weren't using the name Pentium then) at a plant in Ireland. Intel does indeed have facilities in Shannon, and the Pentium II came out precisely as envisioned in the speech.
But the real market doesn't always cooperate. Micron found this out in the 1980s, when Japanese producers flooded the market with memory chips, cost be damned. (Intel left the memory market to companies like Micron, seeing this coming.) The proud Idaho company was forced to go on bended knee to Washington, D.C., seeking relief like a commoner.
In other words, Moore's Law does not account for Ford's Law, a competitor, consortium, or even country's plans to grab market share by ruthlessly taking costs out and flooding the market, even risking a loss to take out competition.
To me, it all makes the rise of China's chip industry the greatest irony of our age. They're using Ford's Law to drive prices through the floor, taking out everyone else's profit once products reach the commodity stage, in order to gain market dominance for what remains (nominally) a communist country.
Consider the Moore's Law curve again. You don't make money in early runs, despite high prices, because yields are low. You make money later, after the product is a commodity, because yields are high. By running their plants at lower costs -- no environmental restrictions, low labor costs, absolute priorities from central planning -- Chinese producers take out the profitable end of the market.
This is how the Model T won. This is why you could get it in any color so long as it was black. Ford drove out all costs, even painting costs, to soak up market share and offer the lowest prices.
But that's not the end of the story. Ford's Law wasn't the end of the automotive industry, in fact it was just the beginning. Ford himself did not count on Alfred P. Sloan.
Bill Gates hasn't. He recommends Sloan's own autobiography, called "My Life at General Motors," as the best book about business you could ever read.
What did Sloan do and what can we learn from it today? First, he re-organized, General Motors from a collection of corporate parts into a smoothly-running whole. Second, he turned cars into fashion, with market segmentation and multiple car models that changed slightly each year.
Ford saw the car as hardware. Sloan perfected it as software.
And that's exactly what America's tech industry needs to do to survive. It needs to marry hardware to software, and use innovation to beat back mass production. It must be ruthless about costs, certainly, but it must embrace rapid change, actually bury competitors under its wheels.
America still has many companies with that opportunity before them. Microsoft is one. IBM is one. One might argue that the opportunity is even before Sun, H-P, and Motorola, and before every young entrepreneur reading these words.
But someone needs to seize it.
Bullwinkle At Your Service
Remember Bullwinkle J. Moose's trick of trying to pull rabbits out of his hat? He usually got something different, a lion, or Rocket J. Squirrel. Yet he kept trying.
So it is with "roll-ups." These are mergers meant to reduce competition by turning a bunch of little guys into one big guy. It almost never works. MCI tried it, Compaq tried it, even IBM tried it in software. Now Ask Jeeves is trying it .
You can see how lame this is just by looking at a list of the assets the company has bought -- iWon, Excite and My Search. The first was launched by CBS as a "constant contest," the second was once a portal - you remember portals -- and the third is a straightforward "meta-search" engine. (Those went far, didn't they?)
Despite how transparent this all was, shares in Ask Jeeves rose 40% on the news. As if to emphasize how Clueless they are, the company also announced it was dropping "paid inclusion" from its search engine, mainly so it could look pure next to Yahoo, which has added it.
Management by press release is absolute proof that a market has grown frothy. Frothy always comes before a fall. You didn't believe me when I wrote this in 98-99. Believe me now. Please.
The Canal Builders
A long time ago, in the 1830s, the United States of America went on a canal-building binge.
The idea was to link the rivers, over the mountains, and enable trade to flourish between east and west, north and south. Huge bond issues were floated, some backed by state governments.
But technology got in the way. The plans were impractical, costs skyrocketed. Meanwhile, a little invention called the railroad made the whole scheme obsolete.
As a result, America went broke, starting in 1837. No European investor wanted to touch anything American for over a decade. We were seen as charlatans, con artists, and gullible fools. So we were.
Fast forward to today, and watch Libya doing the exact same thing.
The idea, like the canals, has some merit. Tap ice deep in the ground, bring it up for use today, irrigate the desert, make it bloom. A golden age, without oil.
What could possibly get in the way? Two things, actually.
One is desalinazation. What's the cost of building desalination plants along the Libyan coast and moving that water inland, as against drilling for it and hauling it up like oil?
Second is fuel cells. Combine hydrogen in a tank with oxygen from the air to produce power wherever you need it. The "pollution" in this case is water. Water created at the power source. Water you can save in that tank, then spread on a field. Water that consists only of hydrogen and oxygen, its chemical building blocks. Put this water on the ground, on a field tilled with the help of animal fertilizer, and grow a crop, while holding the soil. Or run it through rubber hoses, right to the roots, in drip irrigation. Or drink it. And where does the power to make the hydrogen come from? I hear the Sun shines rather reliably in the desert.
The canal builders dreamt big. But big dreams have big price tags. And sometimes (often in fact) there are cheaper ways to the same result. So it is that dreams, even good dreams, can turn into nightmares.
Don't just evaluate dreams on their promises. Evaluate them based on the alternatives. That's a key Clue.
Clued-in was the Committee for Economic Development, for their report demanding balance and a market solution to the Copyright Wars.
Clueless is the very idea that one can patent a simple concept like print-on-demand. Now, if Lightning Source copied a specific methodology, and the technology involved, there might be a case. But someone has to look at the broad claims of patents soon and start laughing them out of court, or innovation dies.
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